The Berlin online fashion retailer Zalando SE received the expected setback at the beginning of the 2022 financial year. In the first quarter, the sales of the growth-accustomed company fell short of the previous year’s level. In addition, the e-commerce specialist slipped into the red. This emerges from an interim report published on Thursday.
In the months from January to March, group sales were just under EUR 2.21 billion and thus 1.5 percent below the level of the same quarter of the previous year. For Zalando, this meant the first decline in the company’s history. The reporting period was “characterized by macroeconomic influences,” the company said. The “rising inflation and higher costs for private households” would have caused customers to be more reluctant to buy. Due to the “gradual easing in the changing pandemic environment”, other products than before were also in demand. Consumers are now again “increasingly interested in seasonal innovations and the latest trends,” the company explained.
The quarterly loss is around 61 million euros
On the other hand, Zalando was able to increase its gross merchandise volume (GMV) slightly: it grew by 1.0 percent to 3.18 billion euros. According to the company, the reason for this was the “strong growth in the partner business”, whose share of the total GMV of the online platform rose to 32 percent. Zalando is well on the way to the goal of “achieving a 50 percent share of the gross merchandise volume in the Zalando shop with the partner business by 2025,” emphasized the e-commerce specialist.
The company also experienced a setback in terms of earnings: it had to report an adjusted loss before interest and taxes (EBIT) of EUR 51.8 million, after having achieved a positive adjusted EBIT of EUR 93.3 million in the same quarter of the previous year. According to a statement, the deterioration in earnings was mainly due to “a lower gross margin due to increased advertising measures to attract customers and increased logistics costs”. The bottom line was a net loss of 61.3 million euros. In the first quarter of 2021, Zalando had still achieved a surplus of 34.5 million euros.
The company wants to react to the latest development with a package of measures
Co-CEO Robert Gentz announced changes in light of recent developments. “We believe in the strength of our business model and are taking further actions to improve our results,” he said in a statement. “We are aligning Zalando for the long term and have always successfully used our flexibility and adaptability to react to current challenges and to emerge from them better and stronger.”
In concrete terms, the company wants to align its offering more closely to the changing preferences of customers, increase cost efficiency and continue to invest in service quality and e-commerce solutions. Zalando also announced the next expansion steps: market entry in Hungary and Romania is planned for the current month.
For 2022, the company now expects growth rates “at the lower end” of the current forecast ranges
The company basically stuck to its annual forecasts, but showed itself to be more cautious than last: It now expects sales and GMV growth rates “at the lower end” of the existing forecast ranges. These predict sales growth of 12 to 19 percent and an increase in GMV of 16 to 23 percent. Adjusted EBIT is also expected to be “at the lower end” of the target corridor of EUR 430 to 510 million. Zalando also stated that further investments in the range of EUR 400 to 500 million are planned for the current year. Co-CEO Gentz was optimistic with regard to the long-term growth targets: “We remain confident that we will achieve our target of more than EUR 30 billion in gross goods volume by 2025,” he emphasized.